China says poor performing SOEs to be ‘severely dealt with’

China says poor performing SOEs to be ‘severely dealt with’

5:36am EST

SHANGHAI (Reuters) – China will evaluate the performance of its state-owned enterprises in 2014 and “severely deal with” companies that perform poorly, are continuously loss-making or do not meet safety standards, state news agency Xinhua said on Sunday.Beijing hopes to move towards a more efficient model for such enterprises where the state retains ownership but management is more focused on getting returns on investment than meeting policy goals.

The government is also seeking to alleviate entrenched industrial overcapacity aggravated by state firms over-investing.

Huang Shuhe, deputy head of the State-owned Assets Supervision and Administration Commission (SASAC), said the agency is working on policy changes to make the SOEs more competitive on the global stage, more profit-driven and make bigger contributions to the economy.

SASAC is a ministerial-level body run by China’s cabinet and is directly responsible for more than 100 state-owned companies, including Sinopec (600028.SS: QuoteProfileResearchStock Buzz), Asia’s top oil refiner, and China Mobile (0941.HK: QuoteProfileResearchStock Buzz), which runs the world’s biggest network of mobile phone users.

Xinhua said China’s state-owned enterprises made about 1.3 trillion yuan ($214.22 billion) of net profit in 2013 and the number of loss-making firms had dropped significantly.

However, out of more than a hundred large SOEs that SASAC administers, only 11 posted a profit of more than 5 billion yuan. Many others remain deep in the red.

Huang said SASAC is determined to “severely deal with” companies that post persistent losses and SOEs that fail to adhere to higher environmental and safety standards will face tough punishment.

Analysts have said China needs to make sweeping reforms of its SOEs, while a senior policy researcher has said that most state enterprises would be turned into companies with diversified shareholders by 2020.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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